In a home foreclosure sale, the seller is actually a bank or mortgage lender. In this scenario, the lender has seized a property from the previous owners who were unable to pay their mortgage. Now, the lender is trying to recoup its losses by selling the property. That makes this scenario different from typical real estate transactions in which the buyer and the seller negotiate through their respective real estate agents, with their lenders in the background.
So, if you’re buying a foreclosure property, do you even need a buyer’s agent to represent you during the process? Spoiler alert: Yes, you still need a buyer’s agent. Here’s why.
1. A buyer’s agent is familiar with the process
We’re going to assume you’re not in the practice of buying foreclosed homes—unless that’s your job—so it’s doubtful that you’re an expert in this area. That’s why having a real estate agent who’s well-versed in this type of transaction is beneficial.
“Negotiating with a bank is very different than negotiating with an individual, and a real estate agent who has worked with banks before understands the bank’s processes and can anticipate the bank’s needs to make the transaction go smoother,” says Chuck Vosburgh, a real estate agent at NextHome Gulf to Bay in Tampa, FL.
Even if you’ve purchased a foreclosure in the past, and you think you remember how that process unfolded, it’s still to your advantage to enlist the help of a buyer’s agent.
“Foreclosures are unique in that no two of them are ever the same. Each bank has their own procedures and timelines, and working with someone who can help navigate the nuances can alleviate a lot of stress for a home buyer,” says Nadia Anac, a real estate agent in Tampa, FL.
2. A buyer’s agent protects the buyer’s interest
Don’t ever forget that banks are in it to recover the money they lost from a foreclosure.
“When purchasing a foreclosure, banks often set the rules by insisting upon certain contracts and conditions, and often, the contracts are 20-plus pages long and designed to protect the bank, with no benefit to the buyer,” says Melissa Zavala, a broker at Broadpoint Properties in San Diego. “No matter the transaction, the best way that buyers can protect themselves is by having their own agent, who acts as a fiduciary in the buyer’s best interest.”
Buyers often get excited about purchasing a foreclosure because they’re expecting to get a great deal on a home. Zavala says that expectation can blind them to any problems.
“The buyer’s agent can help you to navigate the transaction and avoid any possible perils and pitfalls,” she says.
3. A buyer’s agent knows the inspection process
Will Friedner, a broker at the Montana Life Realty Team in Whitefish, MT, says he has listed and sold a large number of foreclosure properties.
“The bank has no idea what has happened in the house, or when and if anything was updated or repaired,” he says. However, a buyer’s agent has extensive experience identifying problem areas and working with home inspectors.
“Sometimes the bank will pay for problems that may show up during inspections like removal of mold,” he explains. However, the average buyer wouldn’t know this, and the average bank isn’t likely to just volunteer this information.
A buyer’s agent can identify problems and locate individuals who can provide a professional assessment of the foreclosed property.
4. A buyer’s agent knows the market
Purchasing a foreclosure can be an opportunity to save some money on a home, but just because it’s a good deal doesn’t mean it’s worth buying. That’s where the expertise of a buyer’s agent comes in.
“An agent can give you market knowledge that you may not be aware of, like location, condition, and comparable sales,” says Brett Ringelheim, a real estate salesperson at Compass in New York City.
This is particularly important when considering resale value or if the home is an investment property.
“Real estate agents will know if there’s a really popular floor plan that many buyers are looking for in the area, or the types of renovations other properties have that are currently on the market,” he says.